TD Securities economists Oscar Munoz and Eli Nir assess US PCE and GDP revisions as broadly supportive for a firm US macro backdrop and a still-hawkish Federal Reserve stance. They highlight robust US growth, sticky inflation and upgraded GDP forecasts, arguing that lower inflation revisions do not materially alter the narrative for the US Dollar or Fed policy expectations.

Growth, inflation and Fed implications

“PCE and GDP revisions were a mixed bag with hawkish backward adjustments to growth and dovish adjustments to inflation. However, the underlying trend is the key story, and robust growth with rising inflation risks should continue to dominate the Fed’s outlook. We still expect the Fed to lift rates in October, but can’t discard a more gradual approach.”

“Despite the larger-than-expected downward revisions to PCE inflation, we think the message remains hawkish on net. Underlying growth is solid, and inflation remains sticky.”

“We have upgraded our Q3 GDP growth forecast to 3.0% q/q AR on the back of still firm consumer spending and capex. Domestic demand is strong.”

“While news of lower inflation changes the intro to the story, it does little to change the underlying narrative. Consumer price changes remain sticky. We now expect core PCE inflation will close 2026 at 3.0% Q4/Q4, and at 2.5% next year.”

“All in, today’s data confirm the macro story that we and, more importantly, the Fed already knew: the US economy remains strong, consumer/capex spending is firm, corporate profits are rising, and inflation is sticky.”